Business Environment Assignment - British Airways

Introduction

The business environment of any organisation is made up of various elements and is further impacted by numerous factors. Some of these factors are in control of the organisation, while many others are not. The decision-making process of any organisation relies heavily on such factors, and adequate strategies need to be made to gain maximum profit in the existing business environment for the business organisation. As the business environment is rapidly changing across all industries, it is equally important for business organisations to develop adequate strategies and decisions rapidly and then implement the strategies quickly.

In the presented paper, the business environment of British Airways is analysed for various factors that influence the organisation (Endres, 1989). The paper also analyses the organisational structure of the organisation as well as the resource allocation process influencing factors. The impact of various local and global factors on the organisational decision-making process of British Airways is assessed in this paper. The paper also evaluates and sheds some light on the organisation’s Corporate Social Responsibility (CSR) factors.

 

Task 1

Identify the purposes of different types of organisations

Organisations are created on the basis of a social agreement that takes place between the various stakeholders in an organisation who aim to make efforts in a collective manner to achieve a single organisational goal (Worthington and Britton, 2006). In common business reference, the policies and decisions of a business organisation are influenced by the environment, but the organisation itself remains separate from the environment. 

At present, there are several types of organisations that exist. The organisations can be broadly categorised into the following five categories: 

• Commercial organisation: such an organisation remains functional in a business environment with the aim of achieving financial success. The decision-making process in such an organisation is centrally focused on higher revenues.

• Non-profit organisations: in contrast with the commercial kind of business entities, non-profit organisations have no aim of earning profits from their practices; instead, they serve the purpose of helping others and community service.

• Public sector organisation: The organisations active in the public sector are generally owned and governed by local governments (state or federal). Such organisations generally have a self-supporting business model (Bove et al., Thill, 2000). In most situations, the aim of such organisations is to provide government services to the general public. 

• Non-government organisations: NGOS are separate from the functioning methods of a commercial organisation, as these organisations do not get involved in any kind of business activity. The services provided by such organisations rely primarily on volunteers and public funding. The aim of NGOS is to support a social cause in most cases.

• Co-operative organisations: In a co-operative organisation, the governing authority is distributed among its members in an equal manner. Such an organisation follow the concept of democracy in the decision-making process. 

Describe the extent to which an organisation meets the objectives of different stakeholders

The aim of British Airways is to make sure that by the business activities of it, it is meeting with the requirements of its stakeholders. In the case of British Airways, the company has different stakeholders as mentioned below:

• Company employees: British Airways has the responsibility towards its employees to provide them a safe workplace environment and a competitive and motivational business environment. The organisation meets its responsibilities by following global standards of workplace safety, and also engages in activities of skill enhancement for its employees.

• Company shareholders: The shareholders of the company have the aim of making profits from the growth of the company. British Airways addresses the needs of its shareholders by continuing to develop effective business strategies that allow the organisation to grow in the short term as well as the long term.

• Customers: The responsibility of British Airways towards its various customers is fair pricing of services, transparency and higher safety regarding the services it provides (Lenssen, Louche and Van Den Berghe, 2005). The company provides these features to the customers and ensures that global standards for passenger safety are strictly followed.

• Society: British Airways is involved in a group of different airline companies that facilitates self-regulation to make sure that the services offered are adequately appropriate and safe on the grounds of ethical considerations. 

 

Explain the responsibilities of an organisation and the strategies employed to meet them

As an organisation, British Airways has many different Corporate Social Responsibilities (CSR) towards its different stakeholders, the local community, customers and the environment. The company needs to follow the ethical and legal considerations in order to meet the responsibilities that are implemented in its operations. 

In order to meet the different responsibilities, British Airways has developed a large pool of strategies that are considered during the decision-making process of the company in every business process. To ensure that the company is meeting its ethical responsibilities, the company has developed a thorough code of conduct that needs to be followed by all employees and management personnel of the company (Pohl and Tolhurst, 2010). Going further than this, the company also believes in meeting its responsibilities above the general regulations and therefore, the company has been involved in self-regulation practices of the airline industry.

 

Explain how economic systems attempt to allocate resources effectively

Resources in any business environment have some degree of influence on the financial condition of the company. British Airways is not an exception to this law, as the company must get involved in the task of allocating its budget according to the needs of resources for company operations. The economic system heavily influences the resource allocation in companies. Different economic systems handle the task of resource allocation in the following manner:

• Free market system: The Free market is an open system that is most commonly followed by the European Union member countries. This kind of market system includes the flow of resources in a way that allows free and self-direction of the forces of the market. In this system, the customers decide what needs to be developed, the manufacturers decide how the products will be developed, and the way products are distributed among the customers relies on the consumers' purchasing power.

• Command economies: Command economies are most commonly practised by governments for the allocation of scarce resources. In this economic system, the resource allocation is thoroughly planned by the people in command of the process. 

• Mixed economies: This is the third type of economic system, which combines the factors of the free market system and the Command economy system. These systems include a private sector industry, in which the resource allocation is mostly influenced by the different market sectors. Even in this sector, the sector is also managed by government regulations for monitoring purposes. The other type in this kind of economic system is the public sector industries, which are mostly governed by the government. 

British Airways has different types of resources that are necessary for its operations in the airline industry; these resources include human resources, airline equipment, monetary resources, and technological resources. In the circumstances of recent economic downfall and recession period, the company had to rethink its financial status in order to maintain the validity and practicality of the business operations of the company. During this duration, many companies lost their financial base and declared bankruptcy, and almost all companies in US and UK focused on methods of cost-cutting to reduce the impact of the recession. British Airways had several options for implementing cost-cutting methods; however, the company did not go against its ethical policies and opted for making cost-cutting decisions that did not impact its employees or customers (Britton, 2013). For example, in this situation, the company could have asked pilots with lesser experience to fly the company aircraft to save on salaries, but British Airways did not find this method ethical as it would potentially risk the lives of customers and degrade the consumer trust the company has developed

In such a situation of recession, British Airways relied on other small methods of cost-cutting, which included reducing the number of flights to destinations generating low revenues and providing more budget-friendly flight packages to attract more consumers and improve the flight booking stats and occupancy status.

 

Assess the impact of fiscal and monetary policies on business organisations and their activities

For a long time, the government has had the role of promoting competitiveness and fair business practices in the business environment by managing and introducing new fiscal and monetary policies. Such policies have a high impact on the activities of business organisations and their decision-making process. The following is the assessment of the business decision-making process at British Airways:

• Fiscal policy: The fiscal policies employed by local government include various legal regulations that relate to the expenditures of an organisation and the taxation laws. Such policies have an impact on the business organisations in two different ways- laws that have an impact on the economy overall, and the organisation or industry-specific laws that affect the operations of British Airways (Carlberg, 2006). It is essential for British Airways to follow the fiscal regulations imposed by the local government, and these can have a direct impact on the business organisation and the way it maintains its financial resources.

• Monetary Policy: In most countries, the Federal Reserve has the responsibility of maintaining the monetary policies in order to keep the inflation rates steady and controlled. The monetary policies influence the cost of money by altering and setting new interest rates. Such policies are introduced to maintain the flow of money and its supply in the market. As an organisation, British Airways relies heavily on its financial status for management of its services and allocation of its resources; a phase that is directly linked to the monetary policies.

 

Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation

British Airways has its primary airline hub located at Heathrow Airport in London, and the company's headquarters are located in Harmondsworth, England. As is clear by the name, the majority of its business practices rely on the trends and policies of the UK government. UK has quite detailed regulations about fair trade policies in the business environment and believes in the fair and competitive nature of the business environment.   

The UK government issues business policies to ensure that every company is able to stay in business on competitive grounds. The UK competitive polices in the business environment are about the regulations that ensure that the business organisations in any industry compete with each other in a fair environment (Clarke and Morgan, 2006). Such a practice encourages British Airways to compete with other airline companies in the market on the basis of higher efficiency, a wide variety of choices,  higher quality of services, better pricing of the services, and a more customer-oriented nature of business. With respect to British Airways, the UK competition policies have the following impact on the operations of the company:

• • Competitive pricing: In order to compete with the new and existing companies in the airline industry, British Airways need to keep its pricing attractive as a way of making its services appealing to consumers.

• • Higher quality: as the UK competition laws discourage any kind of unfair advantage to big organisations, British Airways need to rely on its quality of services in order to gain consumer trust and loyalty. This encourages the company to improve the quality of its services.

• • Innovation: The UK competition policies encourage British Airways to continuously remain involved in tasks of innovation of new services for its customers.

 

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Task 2

Explain how market structures determine the pricing and output decisions of businesses

Developing any product or service has its own life cycle; however, the launching of a product has its own set of procedures and steps that need to be taken before introducing a service to the market. Pricing of the product is an important decision that needs to be taken seriously by any organisation to ensure that the product remains as successful as aimed by the organisation (Etro, 2009). Various factors that need to be considered while deciding the output and pricing decision management for a service include- knowing how large is the targeted customer base, who are in the targeted customer base, purchasing power of the targeted consumer, the cost of developing the mentioned service of product, and the amount of profit the company needs to make from the sale of particular product of service.

In order to develop its output and pricing decisions, it is essential that British Airways handle both of these decisions in a parallel and interconnected process. This needs to be done as both the pricing of a service and the output required rely on each other. The higher the price of a product, the lower the amount of supply required, and vice versa. Such decisions are also influenced heavily by the market structure.    

In a market scenario having perfect competition, organisations are left with no choice but to follow the existing market pricing. In any other kind of market structure, organisations gain some control over the pricing and output decisions. In an oligopoly market structure, the pricing decisions of British Airways depend on the pricing decisions of rival companies. However, in the monopoly market structure, British Airways does not need to pay attention to the pricing of rival companies. However, in any market structure, it is important for British Airways to develop output that ensures that the marginal revenue of the product equals the marginal cost. The pricing should be done in such a way that it clears all of the output entities.

 

Illustrate the way in which market forces shape organisational responses

The various market forces have a deep impact on the response of an organisation in numerous ways. The different market forces that have an impact on British Airways include the following factors: supply, demand, and consumer-oriented marketing.

Supply refers to the amount of goods that the company has available in the market for consumers. Demand for the product refers to the total number of products or services that are wanted by the consumers. In the market structure of any kind, the relation between the supply and demand is always linked in this way (Morgan, 2005). British Airways always tries to follow the state of equilibrium with its supply of available flights to different destinations, i.e. developing only that amount of flights that are demanded by the market. Pricing of the British Airways flight also plays a vital role in changing the demand for the service.

Marketing is also a vital factor in the establishment of the equilibrium of demand and supply. Positive marketing can influence higher demand for British Airways flights, which would then require a higher supply from the organisation.

 

Judge how business and cultural environments shape the behaviour of a selected organisation

A business organisation is always influenced by the environment in which it is, whether it is the business environment of the organisation or the cultural environment. These different environments and various factors involved in this environment can be analysed by using macro and micro environment analysis of British Airways.

Micro Environment: In the case of British Airways, the macro environment of the company includes the various factors that are part of the internal structure of the organisation. As the cultural part of the environment is also reflected among the employees, this also influences the work ethics of the British organisation and impacts the decision-making process, as such processes take input from the people belonging to different cultures (Parhizgar, 2002). 

Macro Environment: Macro environment refers to the external factors that impact British Airways operations. Such factors include the business environment and the government policies influencing the industry. In most cases, British Airways does not have control over such factors; however, it needs to rethink its strategies and make decisions according to the changes occurring in the business environment. The macro environment of British Airways can be assessed by performing a PESTEL analysis:

• • Political factors: The aviation industry in UK region generally consists of major organisations having good political influence. In addition to this, the business also gets affected by factors like political instability in a region.

• • Economic factors: The aviation industry for British Airways is impacted by different economic factors, like currency exchange rates and changing purchasing power of the consumers.

• • Social factors: The cultural factors for an organisation are covered in the social factors of the organisation. For Births airways, the social factors include designing services and marketing campaigns that are in accordance with the likeness of the society.

• • Technological factors: the aviation industry requires the implementation of highly reliable and latest technologies to improve safety, consumer satisfaction and convenience.

• • Environmental factors: In UK region, the government has implemented many environmental protection laws and regulations that need to be followed by British Airways.

• • Legal factors: As a business organisation, British Airways needs to perform its business operations in accordance with the UK business laws, such as tax laws, customer protection, fare trade laws, and competition policies.

 

Discuss the significance of international trade to UK business organisations

Having its services available in the global market, it is important for the UK-based British Airways to develop and implement business strategies that are not simply bound by the region of UK. For its operations in different regions, it is important for British Airways to adapt to the local culture and devise different sets of ethical codes that are in accordance with the local community's ethical considerations.

International trade is very important for the British Airways organisation, as even with its primary business structure being located in the UK region, about half of its operations take place in other countries, as all of the international flights either originate or land in a foreign country (Komori and Wellens, 2009). To make sure that the company services are adequately assessed and managed for international markets, British Airways needs to follow the process of localised market structure analysis for its primary destinations and then develop a business plan and marketing strategy depending on the findings of such analysis.

 

Analyse the impact of global factors on UK business organisations

In the present business environment, which is facilitating the globalisation of business organisations and their services, the global factors have an impact on all regional organisations in different parts of the world. British Airways, being a UK-based company that has its commercial operations, is highly impacted by the different global factors. For example, the company needs to continuously deal with the factor of exchange rates on a global scale, which impacts the financial state of the organisation (Dosi and Galambos, 2013). Other factors that impact the business practices of British Airways include the global level financial crisis, political instability in a particular region, global polices about the airline industry, etc. British Airways consistently develops and revises its strategy to deal with the global factors in an effective and efficient manner. 

 

Evaluate the impact of the policies of the European Union on UK business organisations

As a UK-based organisation, British Airways falls within the regulatory zone of the European Union as England is part of the EU as a primary state. Due to these joint commission policies, it is essential for British Airways to continue to follow the various trade guidelines issued by the European Union (Strohmeier, 2013). In addition to the business ethics, workplace safety regulations, and pricing laws, the EU is also involved in developing fair trade regulations for the various organisations that operate in the EU region.  It is important for British Airways to adhere to the various trade guidelines employed by the European Union for its operations in the region. The following are the different aspects of UK business organisations that are impacted by the policies of the EU:

• • Market structure: The European Union follows the market structure of free market trade, and this market structure impacts the various UK business organisations as UK is a member of EU. As part of the free market structure, UK business organisations such as British Airways need to implement their business processes based on market forces such as consumer choices and their spending power.

• • Competition policies: The European Union supports fair competition policies in order to protect the rights of consumers by preventing the creation of a monopoly in the industry, as well as to assist the new and emerging organisations. For the UK business organisations, this ensures that the large organisations do not have additional unfair advantages over smaller organisations.

• • Regional policies: For the countries that are members of the European Union, many regional policies are decided by the EU that need to be followed by the UK business organisations.

 

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Conclusion

In the presented report, the business environment of British Airways is analysed for various factors that influence the organisation. The paper also analysed the organisational structure of the organisation as well as the resource allocation process influencing factors. The impact of various local and global business factors on the organisational decision-making process of British Airways is assessed in this report. The report also evaluated and shed some light on the organisation’s Corporate Social Responsibility (CSR) factors.

 

References

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5. Dosi, G. and Galambos, L. (2013). The Third Industrial Revolution in Global Business. Cambridge: Cambridge University Press.
6. Endres, G. (1989). British Airways. London: Ian Allan.
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